The well-recognized psychological phenomenon known as “commitment to decision” or “escalation of commitment” poses a significant challenge to decision makers and negotiators. Once the commitment to decision hardens, otherwise intelligent and perceptive negotiators become increasingly entrenched in the continued pursuit of an original decision that from all objective data is doomed to failure.
Experienced mediators have an assortment of tools to identify and deal with many of the common impediments to successfully encouraging continued negotiations. For example, a decision maker’s reluctance to agree during negotiations may be driven by fear of change, status quo bias, risk aversion, high uncertainty avoidance, or situational distrust. Each of these impediments to reaching an agreement have certain behavioral and negotiating hallmarks that are recognizable by experienced mediators and susceptible to varying, straight-forward mediator strategies.
Unfortunately, one of the most intractable and challenging impediments to fruitful negotiations is the “commitment to decision.” One definition of that commitment is:
“A pattern of behavior in which an individual or group will continue to rationalize and escalate a commitment to a decision even when faced with mounting contrary evidence or increasingly negative outcomes rather than alter their course.”
A literary allusion to the “escalation of commitment” can be found in Lewis Carroll’s Through the Looking Glass description of the Red Queen’s race. Regardless of how fast Alice would run, and despite her repeated attempts to run faster and faster, she made absolutely no progress – she was stuck in place going nowhere. Despite the objective, readily available evidence, Alice persisted in her initial commitment to run faster and faster. When the “race” was finally terminated, the Red Queen’s sole observation was “It takes all the running you can do to keep in the same place.” Clearly, Alice’s increased commitment to her initial decision was futile.
What appears to be an irrational rejection of changing circumstances or ignoring newly developing facts can bedevil even the most experienced and intelligent decision makers. Examples of this phenomenon include the decision to combine the New York Central and Pennsylvania Railroads to become the sixth largest corporation in the United States. But just two years later, the company shocked Wall Street when it filed for bankruptcy protection making it the largest corporate bankruptcy in American history at the time. Many analysts predicted the failure of the combination but executives at both New York Central and Pennsylvania Railroads continued their initial commitment to a failed merger. “Commitment to decision” also helps explain the failed consolidation of AOL and Time Warner. Shortly after the merger, the combined company reported an astonishing loss of $99 billion in 2002 and, for reasons that were readily apparent before the consummation of the deal, the combined company never achieved the desired initial decision, achieving a successful convergence. While examples abound in the business world, litigators are also all too familiar with the perils of the “commitment to decision.”
Consider this most comprehensive study of jury verdicts in California, Let’s Not Make a Deal: An Empirical Study of Decision Making in Unsuccessful Settlement Negotiation. The authors compared the ultimate jury verdicts with the last offer and demand by the plaintiffs and the defendants in approximately 2,000 cases. When evaluating the wisdom of the no settlement decision the authors determined the following:
- Plaintiffs erred more frequently than defendants (61% of the time)
- Defendants erred less frequently (21% of the time)
- Plaintiffs average error was $43,000, i.e., the plaintiffs rejected an offer that was, on average, $43,000 greater than the defendant’s last offer
- Defendants average error was $1.1M, i.e., the defendants rejected a demand that was, on average, $1.1M less than the plaintiff’s last demand.
A most surprising result given that all discovery had been completed, the parties were equally aware of all available case facts (both positive and negative), similarly familiar with the law, and familiar with the forum and potential jury pool. Clearly, one explanation for the results of this study is the operation of the “commitment to decision” phenomenon – with the passage of litigation time, the expenditure of increasing costs and efforts, litigants can become irrationally enamored with the prospects of achieving their initial commitment -- an unrealistic and overly successful outcome at trial.
Courts throughout the State of Michigan, particularly the Business Courts, are actively taking steps to prevent the “commitment to decision” phenomenon from hardening by employing various case management techniques:
- Parties are requested to identify a mutually satisfactory mediator at the initial case conference who will be available to assist the parties in resolving or narrowing sub-disputes (i.e., discovery, insurance coverage issues, class certification issues, etc.) in advance of addressing the ultimate resolution of the entire dispute;
- Requiring parties in discovery disputes to first meet with a mediator before a court hearing, as is the practice in the Oakland County Business Court.
- The use of staged and proportionate discovery; and,
- A movement away from case evaluation as the sole ADR tool and, if case evaluation is ordered at all, to only do so after there has been a mediation.
One major objective of these initiatives, as well as others, is to maximize discussions and negotiations on a number of levels before the commitment to decision phenomenon hardens and takes an intractable hold and renders the likelihood of a reasonable and successful dispute resolution negotiation less likely. As all studies underscore – early is better than later.
A study by the Supreme Court Administrative Office, The Efficacy of Case Evaluation and Mediation in the Michigan Circuit Courts, illustrates the importance of “early” when considering the benefits of case evaluation and mediation. Of the nearly 300 cases surveyed, the Study analyzed the impact on case aging when various case management practices were followed: requiring mediation only, requiring case evaluation only, requiring case evaluation followed by mediation, and requiring neither case evaluation nor mediation. The difference was significant:
Case evaluation occurs only after all discovery has been completed, most litigation costs and efforts have been expended, and the “commitment to decision” has most likely hardened to the greatest degree at any time during the litigation process. Moreover, case evaluation in and of itself may only further exacerbate the “commitment to decision” by one or more of the parties. It is no accident the use of case evaluation is waning.
If mediation is a useful tool in combating “escalation of commitment,” the Michigan Courts, and the Business Courts, in particular, are understandably moving toward staged and proportionate discovery. The concept of staged and proportionate discovery has long been advocated by the Michigan Supreme Court in its publication entitled the Caseflow Management Guide, which encourages trial courts to “[develop] a process where initial discovery focuses on the information needed for settlement with discovery for trial provided only in cases that are likely to be tried.” One major reason for this suggestion is to move to a meaningful mediation event as early as possible in the life of the case before the “commitment to decision” becomes further hardened with one or more of the parties. Indeed, most experienced mediators, when requested to conduct an early mediation (or when asked to participate in a mediation before the filing of a lawsuit), will typically explore with the parties whether that base information has been exchanged necessary to have a meaningful mediation as soon as practicable. While early is better, too early can also be problematic. Caution is appropriate to ensure the parties have the information necessary to engage in an optimal mediation event. The exchange of this information can also be most helpful to the mediator in determining whether the “escalation of commitment” phenomenon may be in play and proceed accordingly.
Litigators may be well served to consider the detrimental impact the “commitment to decision” phenomenon may have had on clients. Consider whether, even in the absence of a case management order, a number of the practices outlined may be of strategic benefit to your client. Fostering meaningful discussions and negotiations as early in the case as practicable, before the “commitment to decision” phenomenon hardens, may give rise to the best possible result for your client.